November U.S. Auto Demand Update: Nissan Figures up SAAR to 17.53m from 17.48m on Initial Release

U.S. November Light Vehicle Sales Outlook: Expect Continuing Post Hurricane Normalization

Consumer Discretionary / Industrials

Henry Kwon

Thematic (Sector/Industry)

United states Automobiles / Thematic (Sector/Industry)

<p>November SAAR of 17.48m units was calculated without Nissan having reported its details for November, but when final numbers are released on Monday U.S. time, SAAR should not be impacted significantly.  YTD average SAAR of 17.4m units is within 0.9% of our estimated 17.2m unit SAAR for CY17, and represents a 0.6% YoY decline from 2016 light vehicle sales of 17.46m units.  <strong>In short, industry demand is not growing, and incentives are likely to dampen profitability that could have come from improving transaction price due to heavy incentives.</strong></p><div class="content-highlight"><p>Some notable observations from the November data released were:</p></div><ol><li><div class="content-highlight">Kelley Blue Book and JD Powers estimated retail mix in light vehicle sales to be in the 14.1-14.4m range in November based on pre-Thanksgiving data. This is a level seen for much of the year prior to the hurricane recovery months of September and October, so should be seen as post-hurricane normalization effect.  We highlighted this expectation last week in <a href="https://www.smartkarma.com/insights/u-s-november-light-vehicle-sales-outlook-expect-continuing-post-hurricane-normalization" target="_blank" data-smartkarma-citation="insights:15570">U.S. November Light Vehicle Sales Outlook: Expect Continuing Post Hurricane Normalization</a>.</div></li><li><div class="content-highlight">Light truck mix reached 65% of total industry sales, which is the highest seen in history continuing the industry mix shift away from cars to SUVs and crossovers.  Compact SUV segment has been the bright spot driving this continued mix shift. </div></li><li><div class="content-highlight">Average Transaction Price (ATP) saw a 1.7% sequential rise and 2.6% YoY rise, but incentives as a percentage of ATP remained unchanged sequentially at 10.6%.  Incentives/ATP reached double digits in 2H16, and has been the highest level seen since the Global Financial Crisis.  This continues to suggest that investors should not really be paying close attention to market share statistics since as a whole industry profitability should not be expected to rise in line with rising ATP.</div></li><li><div class="content-highlight">Monthly production data, released mid month, indicated that domestic production has been rising since September, but inventory has also seen a rising trend through October as well, suggesting that current incentive levels may be insufficient to de-stock.  This would suggest that as expected, 2018 is likely to be see a YoY decline in U.S. auto demand at this point under normalized conditions.</div></li></ol><p>In sum, November data as they are initially filtering through did not point to any eye-popping new surprises.</p>

November SAAR of 17.48m units was calculated without Nissan having reported its details for November, but when final numbers are released on Monday U.S. time, SAAR should not be impacted significantly.  YTD average SAAR of 17.4m units is within 0.9% of our estimated 17.2m unit SAAR for CY17, and represents a 0.6% YoY decline from 2016 light vehicle sales of 17.46m units.  In short, industry demand is not growing, and incentives are likely to dampen profitability that could have come from improving transaction price due to heavy incentives.Some notable observations from the November data released were:Kelley Blue Book and JD Powers estimated retail mix in light vehicle sales to be in the 14.1-14.4m range in November based on pre-Thanksgiving data. This is a level seen for much of the year prior to the hurricane recovery months of September and October, so should be seen as post-hurricane normalization effect.  We highlighted this expectation last week in U.S. November Light Vehicle Sales Outlook: Expect Continuing Post Hurricane Normalization.Light truck mix reached 65% of total industry sales, which is the highest seen in history continuing the industry mix shift away from cars to SUVs and crossovers.  Compact SUV segment has been the bright spot driving this continued mix shift. Average Transaction Price (ATP) saw a 1.7% sequential rise and 2.6% YoY rise, but incentives as a percentage of ATP remained unchanged sequentially at 10.6%.  Incentives/ATP reached double digits in 2H16, and has been the highest level seen since the Global Financial Crisis.  This continues to suggest that investors should not really be paying close attention to market share statistics since as a whole industry profitability should not be expected to rise in line with rising ATP.Monthly production data, released mid month, indicated that domestic production has been rising since September, but inventory has also seen a rising trend through October as well, suggesting that current incentive levels may be insufficient to de-stock.  This would suggest that as expected, 2018 is likely to be see a YoY decline in U.S. auto demand at this point under normalized conditions.In sum, November data as they are initially filtering through did not point to any eye-popping new surprises.

U.S. November Auto Demand: SAAR Down to 17.48m as Expected from Hurricane Normalization Effect